Kohler Quoted in Globe about Astra Chief Exec
Massachusetts' highest court yesterday ruled that the former chief
executive of Westborough pharmaceutical company Astra USA Inc. must
forfeit nearly $7 million in salary and bonuses he collected from 1991
Massachusetts' highest court yesterday ruled that the former chief executive of Westborough pharmaceutical company Astra USA Inc. must forfeit nearly $7 million in salary and bonuses he collected from 1991 through 1996.
Ex-Astra chief must forfeit pay
SJC ruling likely to end litigation on harassment case
by Robert Weisman
Massachusetts' highest court yesterday ruled that the former chief executive of Westborough pharmaceutical company Astra USA Inc. must forfeit nearly $7 million in salary and bonuses he collected from 1991 through 1996, when he was fired for harassing female employees and misappropriating company funds. Reversing the decision of a lower court judge, who ruled Astra could not recover compensation paid to Lars Bildman, the Supreme Judicial Court opinion cited the law of New York state, where Astra was incorporated, pertaining to corporate officers who breach their fiduciary duty.
In a 21-page decision, the state's high court justices said New York’s "faithless servant" doctrine allows the company to go after $5.6 million in salary and $1.2 million in bonuses paid to Bildman.
The decision upheld Suffolk Superior Court Judge Margaret Hinkle on several other issues in the long-running litigation, but its reversal on the forfeiture question appeared to close the curtain on the high-profile sexual harassment and embezzlement case.
Company attorney Jeff Robbins, a partner at Boston law firm Mintz Levin, hailed the high court's decision to force Bildman to forfeit his compensation. Robbins said the ruling was not only important in Massachusetts and New York, but could set a national precedent if other states embrace New York's forfeiture standard.
"Given the prominence of this case and given the forcefulness of the court's ruling, this is a holding that could have national significance in the area of forfeiture law," he said.
Robbins represented Astra's successor company - drug maker AstraZeneca, based in England - before the Supreme Judicial Court. AstraZeneca was formed through a 1999 merger between Britain's Zeneca Group PLC and Sweden’s Astra AB, the parent of Astra USA.
Corporate boards face mounting pressure to crack down on executives who breach their fiduciary duty, said Thomas C. Kohler, a Boston College law professor. He said courts are likely to see more cases of companies trying to recoup compensation from wrongdoers.
"This is going to become an issue of greater and greater import," Kohler said. "This decision in Massachusetts may give other courts a framework for ruling on similar kinds of cases. But what one state does is not necessarily of pressing interest to other states."
At the US office of AstraZeneca in Wilmington, Del., spokeswoman Laura Woodin said the court ruling "validates the actions of Astra USA to hold its former executive accountable for his conduct and allows our company to move forward."
Bildman, the Swedish-born executive at the center of the case, yesterday said he is retired and living in Vermont on Social Security. He said his wife divorced him as a result of the case and that he has spent nearly all the money he earned defending himself in court.
"Of course I am disappointed," Bildman said. "It would be impossible not to be disappointed. The money doesn’t concern me at all. I have no money, so it will be uncollectable."
Michael D. Weisman, attorney for Bildman, said he could not discuss the ruling in detail until he had conferred with his client. But he noted that the court upheld lower court rulings that awarded Bildman about $200,000 in damages in connection with a stock grant, prevented Astra from rescinding an employment agreement with him, and held that his client did not have to pay the costs of Astra's investigation.
"I’m grateful that the court reaffirmed many of the important issues in which Bildman prevailed in the court below," said Weisman, a partner at the Boston law firm of Weisman & McIntyre.
Bildman was fired in 1996 after an internal investigation found he and other managers harassed female employees at Astra in Westborough and that he spent company money on home repairs, vacations, and high-priced prostitutes. Women at the company said Bildman engaged in "up-close and personal conduct" and they were under relentless pressure to dress provocatively and to socialize with Bildman and other executives to ensure their employment. The allegations were first reported in BusinessWeek magazine.
In 1997, a federal grant jury sitting in Massachusetts indicted Bildman on multiple counts. He ultimately pleaded guilty to falsifying tax returns and served an 18-month prison sentence.
Astra, meanwhile, agreed in 1998 to pay $9.8 million to settle charges brought by the US government, in what then was the largest sexual harassment case in the history of the Equal Employment Opportunity Commission. Separately in 1998, the company sued Bildman in superior court for misuse of funds, fraud, and breach of fiduciary duty, while he countersued Astra for wrongful termination.
A jury ruled against Bildman on 24 of 25 counts in 2002. He appealed, setting up yesterday's decision.